Web3 Pump-and-Dump Schemes Threaten Crypto Investors With 2000% Gains and Collapses

Web3 pump-and-dump schemes are increasingly threatening investors in major cryptocurrencies by manipulating token prices through coordinated buying, hype, and misinformation before orchestrating a mass sell-off [1]. These fraudulent activities exploit the decentralized and unregulated nature of Web3 markets, enabling manipulators to act with anonymity and speed [1]. The schemes typically follow four phases: pre-launch hype, aggressive promotion, rapid price inflation, and a final coordinated sell-off that leaves most investors with devalued assets [1].

The decentralized infrastructure and 24/7 trading cycles in Web3 create an environment where these schemes thrive, especially with the ease of token creation and the use of encrypted platforms like Telegram and Discord for coordination [1]. In 2024 alone, over 1 million tokens were launched on platforms such as Pump.fun, many of which became targets for manipulation. In some cases, early participants saw returns exceeding 2,000% during a single scheme [1].

Operation Token Mirrors, an enforcement action, recently seized $25 million and charged 18 individuals involved in such schemes, illustrating a growing regulatory response to the problem [1]. Academic research from the University of Bristol further highlights the scale of the issue, showing some tokens being targeted up to 98 times over a four-year period [1].

Investors are advised to recognize the warning signs of pump-and-dump schemes, including sudden price spikes without clear fundamentals, aggressive promotion by unknown accounts, unrealistic return promises, and a lack of project transparency [1]. To protect their investments, investors should conduct due diligence on projects, avoid high-pressure deals, and diversify their portfolios. Scammers often use fake endorsements and deepfakes to lure unsuspecting investors, particularly through unsolicited messages on social media [1].

With increasing regulatory scrutiny and awareness, investors must stay informed and cautious to navigate the evolving landscape of decentralized finance [1]. The key to minimizing risk lies in understanding how these schemes operate and prioritizing research and portfolio diversification [1].

Source: [1] Web3 Pump-and-Dump Schemes Could Pose Risks for Investors in Dominant Cryptocurrencies (https://en.coinotag.com/web3-pump-and-dump-schemes-could-pose-risks-for-investors-in-dominant-cryptocurrencies/)